Share Size - Quick Reference Chart

[KeithQ 1]

To follow up on the discussion Andrew was having re: position sizing I've attached a very simple reference guide that I've been using to quickly determine the right number of shares to trade when in the heat of battle. As Andrew said, where you set your Stop Loss is critically important, and based on the amount your willing to put at risk this ultimately determines the number of shares you can take in any given trade. For example, if you can find a really strong support or resistance level for your Stop Loss within 10 cents of your entry price you could take 1500 shares on that trade with a max loss of $150. Since all the numbers on the chart are based on a $30K account, which would have a max loss per day of 2% or $600, that lets you take four trades per day knowing that even if you get stopped out on all of them you won't exceed your max daily loss. And will happily live to trade another day! But if you're only half wrong, and two trades work and two don't, you'll lose $300 on the two trades that didn't work and make $600 on the two winners (assuming you have a proper 1:2 risk to reward ratio) for a $300 profit gross of fees. Andrew explains all this in much greater detail in the second book which I hope everyone takes the time to read!

But as we all know trading in real life is rarely, and in my limited experience NEVER!, quite that simple. There are lots of reasons why you might want to risk a bigger loss in a trade, whether it's having a higher conviction about that particular stock to seeing a set up that you just really like, which is why I included share sizes for max losses of $200, $400 and $600. Finally, with a 4:1 margin on a $30K account you have up to $120K in buying power, but I wanted to limit each trade to a max investment of $50K so that I could take two trades at the same time if the opportunity arose. And that's why I included the last two columns listing the number of shares I can buy depending on the price of the stock.

This is all really basic stuff that Andrew covers all the time, and I apologize for the long winded explanation! But for me it's been pretty helpful to have something I can just glance at, and don't have to think about, to make sure I'm properly controlling my risk.

Thanks! Hope this is helpful!  

Share Size - Quick Reference Chart.pdf

[atrinjahan 0]

Perfect. I Loved it as this one also includes Stock Price.IThank you KeithQ

I just expanded last two right column into a table attached showing share size based on stock price & Buying Power. So when making watch list, I find share size based on both stop loss & buying power. I take the minimum as share size.

Example: AMD is in the range of $20-$30, take upper edge as $30 - If your max buying power is $25000 (In case you do not want to use your leverage) - your share size will be 834 based on buying power.

Now if your stop loss is 10 cents and based on %2 rule your share size will be 5000 - I will enter the trade with 834 shares ot let's round it to 800 shares.

 

I also did a quick review of BBT trades issued on results tab of our site since begining of  October  upto now as an statistical sample. It clearly showed me %60 of our trades has been made in the range of $20-$40. This has been shown in first graph confirmed in second graph which shows $profit based on  stock price range. To me as a begineer, this study is good enough to stick to this nice range:

$20-$40

Spread Sheet Link:

https://docs.google.com/spreadsheets/d/1QqbcNQUrSQDwsMGA4LVZn5badAACBxvsFIeM0tmxNUA/edit?usp=sharing